(CNSNews.com) – In an unexpected move late Thursday, the Palestinian Authority withdrew its backing for a resolution at the U.N. Human Rights Council that sought to endorse in full a report accusing Israel of war crimes.

Hours earlier, Israeli Prime Minister Binyamin Netanyahu had warned that adoption of the report would kill the Mideast “peace process.” It would also jeopardize the war against terrorism and severely damage the U.N.’s reputation, he said.

The P.A. decision followed strong lobbying by the United States, which is trying to restart stalled Israeli-P.A. negotiations. It will likely mean that the HRC, on its last day of a month-long session in Geneva Friday, will vote on a compromise resolution that defers the matter, at least until the council next meets in March 2010.

The closing days of the current session have been dominated by the so-called Goldstone report, a 575-page document compiled by a HRC-mandated fact finding mission examining Israel’s military offensive against Hamas in the Gaza Strip last winter.

Among its recommendations, the report says the U.N. Security Council should refer allegations of war crimes by Israel and Hamas to International Criminal Court (ICC) prosecutors if the Israelis and Palestinians do not launch independent investigations into the charges within six months.

The mission head, South African judge Richard Goldstone, presented his report to the council on Tuesday. Israel, which refused to cooperate with the mission, repudiated the document, saying it had ignored Israel’s “right to self-defense” in the face of thousands of rocket attacks from Gaza over a number of years.

The U.S. led calls to have the matter handled by the HRC alone, rather than be referred to parties outside the body, including the Security Council and ICC.

It called the report “deeply flawed,” noted that Israel already has criminal inquiries underway, and said it should be encouraged to probe and address the allegations through credible domestic processes, while the Palestinians should also investigate allegations of Hamas abuses.

But the P.A., with the backing of Islamic, Arab, African and “non-aligned” member states, wanted the council to adopt a resolution endorsing the report “in full” – an outcome that would effectively have started the clock on the six month period set by Goldstone.

Late Thursday, however, Israeli media reported that the P.A. envoy to the HRC had told his Israeli counterpart that he would on Friday withdraw P.A. support for the draft resolution.

‘Legitimizing terrorism’

Addressing a cabinet meeting in Jerusalem earlier in the day, Netanyahu said that endorsing the Goldstone report “would strike a fatal blow to the peace process, because Israel will no longer be able to take additional steps and take risks for peace if its right to self-defense is denied.”

The move would also impact efforts to fight terrorism, he said, because “it will afford total legitimization to terrorists who fire upon civilians and who hide behind civilians.”

“To those who – from international platforms, and using international law – attack and condemn the victim who legitimately defends himself, this is a mortal blow to the war on terrorism,” Netanyahu said.

He told the cabinet he was not hopeful that the council would not endorse the report on Friday. “Usually there is an automatic majority against us,” he said, and recalled that the U.N. body, which was created in 2006, has passed more resolutions against Israel than against the rest of the world’s nations put together.

U.N. Watch, a Geneva-based non-government organization critical of the HRC’s approach towards Israel, on Thursday night welcomed the news about the Palestinian shift.

“This constitutes a massive defeat for Mr. Goldstone’s biased report, a slipshod piece of work whose scattershot recommendations to the entire world threatened to harm, not help, the peace process,” said the organization’s executive director, Hillel Neuer.

Critics of the fact finding mission charge that it was created by a body with a history of bias against Israel and set up by an HRC resolution which prejudged the matter it was meant to be investigating.

The resolution, passed by the council last January by a 33-1 vote – Canada opposed it – condemned Israel for “massive violations of the human rights of the Palestinian people,” but did not once directly mention Hamas. (The closest it came was one paragraph, out of 17, urging “all parties … to refrain from violence against the civilian population.”)

When Goldstone subsequently accepted the task of heading the mission, he secured the council’s permission to broaden its mandate, to probe Palestinian conduct as well.

Speaking at the National Press Club in Washington on Thursday, the South African defended his report, saying the mission’s mandate had been to investigate human rights violations, not determine whether Israel’s offensive was justified.

Responding to Netanyahu’s comments, Goldstone said it was “a political statement.”

“I think he got wrong what the international fact-finding mission was all about. It wasn’t looking into the right of self-defense,” he said. “What we were looking at was the manner in which force was used.”